According to two people with knowledge of the situation, Chinese electric vehicle leader BYD has slowed its rate of production and expansion in recent months by cutting shifts at several Chinese plants and postponing plans to add new production lines.
The actions are a warning that BYD’s strong sales growth over the last two years, which helped it surpass Tesla as the largest EV manufacturer in the world, may slow down as it struggles with growing inventory despite implementing significant price reductions in China’s fiercely competitive car industry.
According to sources who asked not to be identified because the topic is confidential, BYD has eliminated night shifts and cut output by at least a third of the capacity at several of its factories.
According to one of the people, BYD has halted some plans to establish new production lines and enforced these previously undisclosed constraints on at least four companies.
With at least seven auto facilities in China, BYD sold 4.27 million cars last year, primarily in that nation. This year, the company hopes to increase sales by nearly 30% to 5.5 million.
According to data from the China Association of Automobile Manufacturers, BYD’s output growth slowed to 13% and 0.2% year-over-year in April and May, respectively. These slowdowns were the slowest since February 2024, when a week-long lunar New Year vacation interrupted plant operations.
According to the data, BYD began increasing monthly output in 2023 and 2024 during the second quarter of the year. However, this year’s pattern has shifted, with average output in April and May being 29% lower than in 2024’s fourth quarter.
By rapidly expanding production and accelerating the release of new, more inexpensive models, BYD has become the largest EV manufacturer in the world in a matter of years.
A wider selloff in Chinese car stocks and new price reductions from competitors were brought on by its latest price incentives, which lowered the starting price of its cheapest model to 55,800 yuan ($7,800).
According to a May poll by the China Automotive Dealer Association, BYD dealers had the largest average inventory of any brand in China, with 3.21 months on hand, while the industry average was 1.38 months.
According to government-owned media last month, a major BYD dealer in the eastern province of Shandong has gone out of business, with at least 20 of its outlets discovered to be closed or abandoned.
In early June, the China Auto Dealers Chamber of Commerce urged automakers to set “reasonable” production targets based on sales success and to cease offloading too many cars on dealerships as inventory levels rise. According to the group, fierce price battles were putting pressure on cash flow and lowering profitability.
In an effort to ease financial strains, Chinese auto dealers encouraged automakers on Monday to pay cashback incentives within 30 days.
As the years-long practice has put pressure on suppliers, automakers, and dealers throughout the industry, Chinese regulators have recently increased their monitoring of the auto sector due to deepening pricing competition.
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In an effort to boost sales and counteract the waning momentum in their domestic market, Chinese automakers are now aggressively searching for foreign markets.
